Category Archives: Worth Re-reading

Chapters in My Life by Frederick Taylor Gates

Frederick Taylor Gates, the senior business and philanthropic advisor to John D. Rockefeller, recounts his life story and interaction with JDR

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The Carolina Way: Leadership Lessons From a Life in Coaching by Dean Smith

Summary
  1. A detailed overview of University of North Carolina basketball coach Dean Smith’s philosophy. One of the best books on leadership I’ve yet come across
Key Takeaways
  1. Smith gave his players the same 3 goals each year – play hard, play together, play smart as these were the only things each player had in their own control
    1. Play hard – Insist on consistent effort. Focus on the effort and the end will take care of itself. The final result, especially in a competitive situation, is often outside your control, but the quality of your team’s effort is not. Create a system that demands effort, rewards it, and punishes its absence
    2. Play together – Play unselfishly. Don’t focus on individual statistics. Recruit unselfish players, reward unselfish play and punish selfish play and showboating
    3. Play smart – Execute properly. Understand and consistently execute the fundamentals. Drill the fundamentals, reward their execution and punish their absence
  2. Making winning the goal can actually get in the way of winning. Rather, winning should be the byproduct of success
  3. Honesty was the basic foundation for everything Coach Smith did
  4. Coaches are part benevolent (open-minded) dictator and part servant to the player. Honest and fair and plays no favorites. Pushes but understands different situations. Disciplinarian but understands that all individuals are not the same. Requires people to look at team goals but he understands that individuals have their own goals and needs too. Listens to players in one-on-one meetings and hears suggestions but when it comes time to approve the overall picture, he must be a firm leader with a clear vision and strong convictions
  5. His players worked so hard because they saw that he worked harder than any of them did. Coach Smith made players feel good about sacrificing for the greater good – power of incentives and rewards
  6. His philosophy didn’t allow for a star system. It was all about the team
  7. Great leaders take the blame for losses and dole out credit for victories
    1. Blaming others for mistakes not only doesn’t correct it, but compounds it
  8. Believed in following a process rather than dwelling on winning or worrying about consequences
  9. Genuinely cared about his players – Honesty, integrity, discipline administered fairly, not playing favorites, recruiting the right people, effective practice and training, and caring are foundations that any organization would be wise to have in place. The most important thing in good leadership is truly caring
  10. The most effective leaders have the talent to create a sound strategy for their teams or business; knowledge of the importance of recruiting good people who wish to improve their personal skills and believe in the companies’ or teams’ philosophy; understand that whether they like it or not, they lead by example; belief in the importance of being light enough on their feet to adapt to changing conditions; and the ability to honor their commitments, admit their mistakes and take responsibility for their failures
  11. Rituals help greatly in team building
  12. Constant iteration and experimentation at Air Force Academy was a great learning experience for Smith. This type of risk appetite was natural to Smith at this time because he was new, young and had nothing to lose. Not falling into the trap of complacency as one gets older and more successful is vital
  13. Tore down freshmen to break habits and then built them back up as team leaders
  14. Never had the same team two years in a row but was still so consistently successful! Disguise weaknesses and accentuate strengths and always adapt based on personnel. Didn’t fear change even in the middle of the season
    1. His coaching system was that he had no system because each team was different
  15. Aimed for players to be quietly confident, it must be earned
  16. Getting to the top is very difficult, staying there is even harder. You prepare for that pressure through deliberate practice
  17. Never allowed anyone but players and the coaching staff into the locker room. This created a space of total trust and love where everyone could be open and honest with each other in the midst of competition
  18. Map is not the terrain. They had their own statistics that they followed and praised
  19. Basketball is simply an extension of Smith’s philosophy of life
  20. Keep poise and have options when things go poorly
  21. Mistakes – recognize it, admit it, learn from it, forget it
  22. Fundamentals of basketball are the fundamentals of good character, of life. Many of the same skills are necessary for success regardless of the endeavor you choose
  23. Best leaders are absolutely devoted to their people
  24. Winning should simply be thought of as a byproduct of the process. This is the best way to win as it gets you in a healthy frame of mind
  25. Nation’s leading scorer rarely plays for a ranked team and never for a championship team
  26. Good businesses tend to die because senior leaders lose touch with the outside world, the important stakeholders. Executives spend too much time working and not enough time thinking. They should delegate more to create more. Work on the important things first; your people and their skills are the important things
  27. Don’t let winning get you to overlook mistakes – process over outcome
  28. Sole focus on winning (profits) actually leads to lower chance of winning
  29. Crises bring each of us face to face with our inadequacies
  30. Skill of being a gracious loser is vital for leaders. Must see an opportunity in every loss
  31. Part method teaching – can better understand whole if it is broken down into smaller, manageable parts
  32. Hiring well makes managing easy
  33. If treated correctly and this advice followed, players become the best recruiters
  34. People will only change when they see it will benefit them
  35. If the hard work is also fun, performance will be enhanced greatly
  36. Must first provide first rate employee experience before can get first rate customer experience
  37. There is a real strength derived from depending on one another
  38. Avoid the formation of cliques at all costs
  39. High performing teams – individual peak performance, selflessness, high morale, no fear of failure, mutual care and support
  40. Specific coaching and understanding of role is vital – also what one’s role is not
  41. Never substitute because of a player’s mistakes – would lead to scared playing and public embarrassment
  42. Teamwork hard to build because of society’s fascination with individual success and the emphasis it places on winning no matter how it is achieved
  43. Smith was a master at tailoring his teaching method to each individual
  44. Never underestimate the power of appreciation
  45. Smith institute the tired signal with his players – this made them play all out until they needed a quick break. To overwork is to underperform
  46. Everyone is important
  47. Take care of the small things without getting bogged down by minutiae – punctuality, no swearing, clean and matching uniforms, no scoreboard gazing (worry about the process and not the outcome and stay in the present), hyper focused on end of game situations, set the pace by being the aggressor, not the reactor,
    1. Great leaders are adept at identifying and tending to the crucial details. The smartest use of their time, effort and money is to spend far more of them in the planning stages than one thinks necessary
  48. One-on-one meetings very important as it opens up the lines of communication, builds trust and shows you care
  49. One of the best ways to teach is for all leaders and workers to mentor younger associates. Solve for problem of not getting to it after retiring or because too busy by doing your teaching on the job
  50. Success is the byproduct of intelligent, sustained effort
  51. People accept punishment if it is fair and consistent
  52. On confidence
    1. Think through what the worst possible outcome could be concerning the project being worked on
    2. Predict the probability of that worst-case scenario’s happening
    3. Develop a plan to implement if the worst does occur
    4. If the worst outcome becomes reality, assess whether it can be survived
    5. Once the task begins, give the best possible performance. Since that’s all anyone can do, enjoy the challenge
    6. If failure results, learn from it, forgive yourself and move on to the next task
  53. On continuous learning
    1. Most people say best learning experiences come from mistakes by why wait? A smarter strategy is to learn on a continuous basis from daily events. Each lesson might be a small one, but soon the lessons will accumulate to become something meaningful and important in your life
    2. Achiever’s Brain Book – an accessible notebook to write in throughout the day. In spare minutes write down key things you’ve learned and at the end of the day add the three major experiences of the day (decisions, projects worked on, meetings attended, interactions) Analyze what was done in those three instances and what the impacts or consequences were. Then establish actions based on what you’ve learned that will positively affect your future behavior
    3. The key to continuous learning is to articulate one’s inarticulate knowledge. Do it continuously, draw lessons from daily experiences. Lessons don’t arrive on command, but you can budget a little time in your life to step back and get the perspective that leads to insight
  54. Don’t waste time looking back. Learn from mistakes/regrets, make sure they never happen again and spend time planning what’s next
  55. Importance of change – Smith’s success came partly from his ability to adapt and change better than anyone else. He knew where to place his players on the court to get the most of each man’s ability. Leaders should select for their team’s individuals who have proved capacity to change (curiosity, listen well to ideas different from their own, humble, resilient, test new ideas, willing to admit they’re wrong?)
  56. The importance of the bottom half of the roster – often one of the hardest things is finding the right kind of leader to be the 11th and 12th men on the team. In the best of worlds, these two would know in advance that they wouldn’t play much but would work hard in practice and meetings to make the team better
What I got out of it
  1. Focus obsessively on process and things you can control, the most important thing in high performing teams is genuine caring, constant iteration, adaptation and non-dogmatic ideals are needed when you have a different team every year!, Achiever’s Brain Book

Thinking in Systems by Donella Meadows

A primer on problem solving on scales from local to global, how systems exist and react in the real world while acknowledging that all models are false although they help us simplify and at times make better predictions

The Lessons of History by Will and Ariel Durant

Summary

  1. Will and Ariel Durant provide an unparalleled multi-disciplinary recount of history, covering major themes, events and people. This 100 page book is an incredible summary of their 10,000+ page series, The Story of Civilization.

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Key Takeaways

  1. History captures how man has behaved for 6,000 years and learning this will help protect you and avoid poor decisions
  2. Through much war and tragedy man has survived and prospered – one of the main lessons to take from studying history
  3. Man competes with each other and pushed himself, others and groups as a whole to become better. This competition helps man reach new heights and learn new things. Life needs to breed in order to pass down these competitive advantages to future generations. Competition is inevitable and necessary as only the fittest survive
  4. History is only a fraction of biology
  5. History is a humorist
  6. Throughout the ages man has changed his behavior but cannot change human nature, his instincts
  7. The role of having character developed in people so they could rise to the occasion
  8. Moral codes adjust and adapt to the prevailing social conditions
  9. At one point, every vice was a virtue. Sexual promiscuity secured survival but today seen as a vice, etc.
  10. There are many more things that should enter a man’s thoughts and decisions than just reason – sentiment, tenderness, mystery, affection. Reason is just a tool but character is based on instincts and intuition and reason can therefore not be the sole defining characteristic of man
  11. Freedom is a trial, it is a terrific test. When we made ourselves free (through reason) we forgot to make ourselves intelligent
  12. Nature does not agree with man’s definition of good and bad. For nature, that which is good is what survived and that which is bad goes under
  13. Morality is dependent upon religion and religion gives man hope that he can survive life, that he can bear reality
  14. Insanity is the loss of memory
  15. God is a creative force in any way He appears. God is love too, but love is only one of many creative forces
  16. “Economics is history in motion” – Karl Marx
  17. Socialist states have been around for thousands of years – the Incas and the Chinese being the most successful
  18. The essence of beauty is order. Must balance order and liberty to have a successful state
  19. Peace is not unrealistic but you are fighting an uphill battle against history. War doesn’t really solve anything but replaces one set of problems for another
  20. Civilization is social order leading to cultural creation – human relationships, trade and commerce, art, government, etc.
  21. History repeats itself at large, but not in detail. All civilizations decay either from internal strife or lack of trade and commerce
  22. Durant is not an optimist and not a pessimist but a realist about the future. Hard to say if progressing or regressing – simply changing
  23. Progress is glacially slow and human nature has hardly changed in thousands of years. Progress means attaining the same ends (sex, wealth and health) through more efficient means
  24. If humans are different today than 50,000 years ago it is because our accumulated social culture is stronger and more refined than before, not because our biological nature has changed
  25. History is philosophy teaching by examples
  26. The excess of anything leads to its opposite reaction. (e.g., the excess of liberty leads to slavery)
  27. Every generation rebels against the preceding one
  28. If youth but knew and old age but could

  Summary

  1. Pound for pound may have the most wisdom of any book. An amazing summary of history’s major events and themes. Social order leading to cultural creation is one of man’s defining accomplishments and without it we might still be living in caves. Also, the idea of history being philosophy in motion I thought was a great way to think about it

Seeking Wisdom: From Darwin to Munger by Peter Bevelin

Summary

  1. Through real life examples, many of them centered around Warren Buffett and Charlie Munger, Peter Bevelin helps the reader learn how to think better, make fewer poor decisions  understand ourselves and others better. Discusses mental models, human fallibilities, heuristics, instincts, human psychology, biology and more.

Key Takeaways

  1. Main goal is to understand why people behave the way they do. “This book focuses on how our thoughts are influenced, why we make misjudgments and tools to improve our thinking. If we understand what influences us, we might avoid certain traps and understand why others act like they do. And if we learn and understand what works and doesn’t work and find some framework for reasoning, we will make better judgments. We can’t eliminate mistakes, but we can prevent those that can really hurt us.”
  2. Learn from other’s mistakes
  3. Learn the big ideas that underlie reality and develop good thinking habits (namely, objectivity)
  4. This book is a compilation of what Bevelin has learned from reading some of the works of the world’s best thinkers
  5. Book is broken down into 4 parts – what influences our thinking, examples of psychological reasons for misjudgments, reasons for misjudgments caused by both psychology and a lack of considering some basic ideas from physics and mathematics and lastly describes tools for better thinking
What I got out of it
  1. Seriously good read if you’re at all interested in understanding how and why we make decisions (both bad and good) and how we can go about improving our thought processes and tools. Fantastic read and couldn’t recommend more highly
Part 1 – What Influences Our Thinking?
 
  • Brain communicates through neurochemicals and genes are the recipe for how we are made
  • Behavior is influenced by genetic and environmental factors
  • The flexibility of the brain is amazing as it can change due to our thoughts and experiences
  • Mental state (situation and experience) and physical state are intimately connected – beliefs have biological consequences, both good and bad
  • World is not fixed but evolving – evolution has no goal
  • Pain (punishment) and reward (pleasure) have evolutionary benefits with pain avoidance being our primary driver
  • Hunter-gatherer environments have formed our basic nature – competitive, access to limited resources, many dangers, self-interest, ostracism = death
  • Cooperation leads to trust, especially amongst relatives
  • Fear is our most basic emotion and it guides almost everything we do. Repeated exposure lessens instinctual reactions
  • Novelty is always sought out
  • Reputation, reciprocation and fairness are big human motivators
  • Very painful to lose anything, especially status, once obtained. Higher status linked to higher health and well being
  • People learn their behavior from their culture
  • Assume people will act in their self-interest
  • Don’t blindly imitate/trust others – think rationally and form your own opinions
Part 2 – The Psychology of Misjudgments
  • Outlines 28 reasons for misjudgment. These are never exclusive or independent of each other. Many of these echo similar sentiments to Cialdini’s Influence
    1. Bias from mere association
    2. Underestimating the power of rewards and punishment
    3. Underestimating bias from own self-interest and incentives
    4. Self-serving bias
    5. Self-deception and denial
    6. Bias from consistency tendency (only see things that confirm our already formed beliefs)
    7. Bias from deprival syndrome (strongly reacting when something is taken away)
    8. Status quo bias and do-nothing syndrome
    9. Impatience
    10. Bias from envy and jealousy
    11. Distortion by contrast comparison
    12. Bias from anchoring
    13. Over-influence by vivid or the most recent information
    14. Omission and abstract blindness
    15. Bias from reciprocation tendency
    16. Bias from over-influence by liking tendency
    17. Bias from over-influence by social proof
    18. Bias from over-influence by authority
    19. Sensemaking
    20. Reason-respecting
    21. Believing first and doubting later
    22. Memory limitations
    23. Do-something syndrome
    24. Mental confusion from say-something syndrome
    25. Emotional arousal
    26. Mental confusion from stress
    27. mental confusion from physical/psychological pain, the influence of chemicals or diseases
    28. Bias from over-influence by the combined effect of many psychological tendencies working tougher
  • Behavior can’t be seen as rational/irrational alone – must have context
  • People can take bad news, but we don’t like it late
  • Evaluate things, people and situations by their own merits
  • Past experiences are often context dependent. Just because some stimulus caused you earlier pain, doesn’t mean that is still the case today
  • Create a negative emotion if you want to end a certain behavior
  • Good consequences don’t necessarily mean you made a good decision and bad consequences don’t necessarily mean you made a bad one
  • Frequent rewards, even if smaller, feels better than one large reward
  • The more “precise” people’s projections about the future are, the more wary you should be
  • Munger looks for a handful of things in people – integrity, intelligence, experience and dedication
  • Recognize your limits. How well do you know what you don’t know/ Don’t let your ego determine what you should do
  • Bad news that is true is better than good news that is false
  • People associate being wrong as a threat to their self-interest 
  • Labeling technique – when somebody labels you, whether you agree or not, you are more likely to comply and behave in ways consistent with that label
  • Avoid ideology at all costs
  • “There is nothing wrong with changing a plan when the situation has changed.” – Seneca
  • Base decisions on current situations and future consequences
  • Don’t fall in love with any particular point of view
  • Know your goals and options
  • Remember that people respond to immediate crisis and threats
  • People favor routine behavior over innovative behavior and similarly, people feel worse when they fail as a result of taking action than when they fail from doing nothing
  • Deciding to do nothing is also a decision. And the cost of doing nothing could be greater than the cost of taking an action
  • People give more weight to the present than to the future. We seek pleasure today at a cost of what may be better in the future
  • “We envy those who are near us in time, place, age or reputation.” – Aristotle
  • “The best way to avoid envy is the deserve the success you get.” – Aristotle
  • How we value things depends on what we compare them with
  • Sometimes it is the small, invisible changes that harm us the most
  • Accurate information is better than dramatic information. Back up vivid stories with facts and numbers
  • We see only what we have names for
  • Always look for alternative explanations
  • We see available information. We don’t see what isn’t reported. Missing information doesn’t draw our attention
  • A favor or gift is most effective when it is personal, significant and unexpected
  • Always try to see situations and people from their POV
  • People tend to like their kin, romantic partners and people similar to them more as well as those who are physically attractive. We also like and trust anything familiar
  • Concentrate on the issue and what you want to achieve
  • The vast majority of people would rather be wrong in a group than right in isolation
  • “It is easy in the world to live after the world’s opinion; it is easy in solitude to live after our own; but the great man is he who in the midst of the crowd keeps with perfect sweetness the independence of solitude.” – Ralph Waldo Emerson
  • When all are accountable, nobody is accountable
  • Being famous doesn’t give anybody special expertise – beware ads with celebrity endorsements
  • “We don’t like uncertainty. We have a need to understand and make sense of events. We refuse to accept the unknown. We don’t like the unpredictability and meaninglessness. We therefore seek explanations for why things happen. Especially if they are novel, puzzling or frightening. By finding patterns and causal relationships we get comfort and learn for the future.”
    • Consider how other possible outcomes might have happened. Don’t underestimate chance
  • Any reason, no matter how flimsy, often helps persuade others
  • 5 W’s – A rule for communication – must tell who was going to do what, where, when and why.
  • Memory is very selective and fallible – keep records of important events
  • Don’t confuse activity with results. There is no reason to do a good job with something you shouldn’t do in the first place
  • “Wise men talk because they have something to say; fools, because they have to say something.” – Plato
  • Awareness of ignorance is the beginning of wisdom
  • When we make big decisions, we could compare our expected feelings with those of people who have similar experiences today. In that sense, we are not as unique as we think we are
  • Understand your emotions and their influence on your behavior. Ask – Is there a reason behind my action?
  • Hold off on important decisions when you have just gone through an emotional experience
  • Cooling-off periods help us think things through
  • Stress increases our suggestibility
  • Stress is neither good nor bad in itself. It depends on the situation and our interpretation
  • “I’ve suffered a great many catastrophes in my life. Most of them never happened.” – Mark Twain
  • People tend to overestimate personal characteristics and motives when we explain the behavior of others and underestimate situational factors like social pressure, roles or things over which there are no control
  • The less knowledgeable we are about an issue, the more influenced we are by how it is framed
  • Advice from Munger – can learn to make fewer mistakes than others and how to fix your mistakes faster when you do make them. Were the factors that really govern the interests involved, rationally considered and what are the subconscious influences where the brain at a subconscious level is automatically doing these things – which by and large are useful, but which often mis function. And, take all the main models from psychology and use them as a checklist in reviewing outcomes in complex systems
Part 3 – The Physics and mathematics of Misjudgments
  • 9 Causes of Misjudgment/Mistakes
    1. Systems Thinking
      • Failing to consider that actions have both intended and unintended consequences. Includes failing to consider secondary and higher order consequences and inevitable implications
      • Failing to consider the likely reactions of others
      • Overestimating predictive ability or using unknowable factors in making predictions
    2. Scale and limits
      • Failing to consider that changes in size or time influence form, function and behavior
      • Failing to consider breakpoints, critical thresholds or limits
      • Failing to consider constraints – system’s performance constrained by its weakest link
    3. Causes
      • Not understanding what causes desired results
      • Believing cause resembles its effect – a big effect must have a big, complicated cause
      • Underestimating the influence of randomness in good or bad outcomes
      • Mistaking an effect for its cause
      • Attributing an outcome to a single cause when there are multiple
      • Mistaking correlation for cause
      • Drawing conclusions about causes from selective data
      • Invert, always invert! – look at problems backwards
    4. Numbers and their meaning
      • Looking at isolated numbers – failing to consider relationships and magnitudes. Not differentiating between absolute and relative risk
      • Underestimating the effect of exponential growth
      • Underestimating the time value of money
    5. Probabilities and number of possible outcomes
      • Underestimating the number of possible outcomes for unwanted events. Includes underestimating the probability and severity of rare or extreme events
      • Underestimating the chance of common but not publicized events
      • Believing one can control the outcome of events where chance is involved
      • Judging financial decisions by evaluating gains and losses instead of final state of wealth and personal value
      • Failing to consider the consequences of being wrong
    6. Scenarios
      • Overestimating the probability of scenarios where all of a series of steps must be achieved for a wanted outcome. Also, underestimating the opportunities for failure and what normally happens in similar situations
      • Underestimating the probability of system failure
      • Not adding a factor of safety for known and unknown risks
      • Invest a lot of time into researching and understanding your mistakes
    7. Coincidences and miracles
      • Underestimating that surprises and improbable events happen, somewhere, sometime to someone, if they have enough opportunities (large enough or time) to happen
      • Looking for meaning, searching for causes and making up patterns for chance events, especially events that have emotional implications
      • Failing to consider cases involving the absence of a cause or effect
    8. Reliability of case evidence
      • Overweighing individual case evidence and under-weighing the prior probability considering the base rate or evidence from many similar cases, random match, false positive or false negative and failing to consider relevant comparison population
    9. Misrepresentative evidence
      • Failing to consider changes in factors, context or conditions when using past evidence to predict likely future outcomes. Not searching for explanations to why past outcome happened, what is required to make past record continue and what forces change it
      • Overestimating evidence from a single case or small or unrepresentative samples
      • Underestimating the influence of chance in performance (success and failure)
      • Only seeing positive outcomes and paying little or no attention to negative outcomes and prior probabilities
      • Failing to consider variability of outcomes and their frequency
      • Failing to consider regression – in any series of events where chance is involved unique outcomes tends to regress back to the average outcome
      • Postmortems – Record your mistakes! Instead of forgetting about them, they should be highlighted
        • What was my original reason for doing something?
        • What were my assumptions?
        • How did reality work out relative to my original guess? What worked and what didn’t?
        • What worked well? What should I do differently? What did I fail to do? What did I miss? What must I learn? What must I stop doing?
Part 4 – Guidelines to Better Thinking
  • This section helps provide tools which create a foundation for rational thinking
  • 12 Tools for rational thinking
    1. Models of reality
      • A model is an idea that helps us better understand how the world works. Helps explain “why” and predict “how” people are likely to behave in certain situations
      • Ask yourself, “Is there anything I can do to make my whole mental process work better? And I [Munger] would say that the habit of mastering multiple models which underlie reality is the best thing you can do…It’s just so much fun – and it works so well.”
      • A valuable model produces meaningful explanations and predictions of likely future consequences where the cost of being wrong is high
      • Considering many ideas help us achieve a holistic view. No single discipline has all the answers – need to consider mathematics, physics, chemistry, engineering, biology, psychology and rank and use them in order of their reliability
      • Must understand how different ideas interact and combine
      • Can build your own mental models by looking around you and asking why things are happening (or why things are not happening).
    2. Meaning
      • Truly understand something when “without using the new word which you have just learned, try to rephrase what you have just learned in your own language.”
      • Meaning of words, events, causes, implications, purpose, reason, usefulness
      • “Never express yourself more clearly than you are able to think.” – Niels Bohr
      • Use ideas and terms people understand, that they are familiar with and can relate to
      • We shouldn’t engage in false precision
    3. Simplification
      • “If something is too hard, we move on to something else. What could be more simple than that?” – Charlie Munger
      • Make problems easier to solve. Eliminate everything except the essentials – break down a problem into its components but look at the problem holistically – first dispose of the easy questions
      • Make fewer but better decisions
      • Dealing with what’s important forces us to prioritize. There are only a few decisions of real importance. Don’t bother trying to get too much information of no use to explain or predict
      • Deal with the situations in live by knowing what to avoid. Reducing mistakes by learning what areas, situations and people to avoid is often a better use of time than seeking out new ways of succeeding. Also, it is often simpler to prevent something than to solve it
      • Shifting mental attention between tasks hugely inefficient. Actions and decisions are simpler when we focus on one thing at a time
      • Some important things we can’t know. Other things we can know but they are not important
      • Activity does not correlate with achievement
    4. Rules and filters
      • Gain more success from avoiding stupid decisions rather than making brilliant ones
      • Filters help us prioritize and figure out what makes sense. When we know what we want, we need criteria to evaluate alternatives. Try to use as few criteria as necessary to make your judgment. Then rank them in order of their importance and use them as filters
      • More information does not mean you are better off
      • Warren Buffet uses 4 criteria as filters
        • Can I understand it? If it passes this filter then,
          • Understanding for Buffett means thinking that he will have a reasonable probability of being able to assess where the business will be in 10 years
        • Does it look like it has some kind of sustainable advantage? If it passes this filter,
        • Is the management composed of able and honest people? If it passes this filter,
        • Is the price right? If it passes this filter, we write a check
      • Elimination – look for certain things that narrow down the possibilities
      • Checklist procedures – help reduce the chances of harm (pair with Gawande’s The Checklist Manifesto)
        • Should think about – different issues need different checklists, a checklist must include each critical item necessary for “safety” and avoiding “accidents” so we don’t need to rely on memory for items to be checked, readily usable and easy to use, agree with reality
        • Avoid excessive reliance on checklists as this can lead to a false sense of security
    5. Goals
      • How can we make the right decision if we don’t know what we want to achieve? Even if we don’t know what we want, we often know what we don’t want, meaning that our goal can be to avoid certain things
      • Goals should be – clearly defined, focused on results, concrete, realistic and logical, measurable, tailored to individual needs and subject to change
      • Goals need target dates and controls stations measuring the degree to which the goal is achieved
      • Always ask – What end result do I want? What causes that? What factors have a major impact on the outcome? What single factor has the most impact? Do I have the variable(s) needed for the goal to be achieved? What is the best way to achieve my goal? Have I considered what other effects my actions will have that will influence the final outcome?
    6. Alternatives
      • Opportunity cost – every minute we choose to spend on one thing is a minute unavailable to spend on other things. Every dollar we invest is a dollar unavailable for other available investments
      • When we decide whether to change something, we should measure it against the best of what we already have
    7. Consequences
      • Consider secondary and long-term effects of an action
      • Whenever we install a policy, take an action or evaluate statements, we must trace the consequences – remember four key things:
        • Pay attention to the whole system, direct and indirect effects
        • Consequences have implications or more consequences, some which may be unwanted. We can’t estimate all possible consequences but there is at least one unwanted consequence we should look out for,
        • Consider the effects of feedback, time, scale, repetition, critical thresholds and limits
        • Different alternatives have different consequences in terms of costs and benefits. Estimate the net effects over time and how desirable these are compared to what we want to achieve
    8. Quantification
      • How can you evaluate if a decision is intelligent or not if you can’t measure it against a relevant and important yardstick?
      • We need to understand what is behind the numbers
        • Buffett says that return on beginning equity capital is the most appropriate measure of single-year managerial performance
    9. Evidence
      • Evidence helps us prove what is likely to happen or likely to be true or false. Evidence comes from facts, observations, experiences, comparisons and experiments
      • Occam’s Razor – if we face two possible explanations which make the same predictions, the one based on the least number of unproven assumptions is preferable, until more evidence comes along
      • Past record is the single best guide
      • The following questions help decide if past evidence is representative of the future – observation (will past/present behavior continue?), explanation (why did it happen in the past or why does it happen now?), predictability (how representative is the past/present evidence for what is likely to happen in the future?), continuation and change (what is required to make the past/present record continue or to achieve the goal?), certainty and consequences (how certain am I?)
      • Falsify and disprove – a single piece of evidence against something will show that it is false
      • Look for evidence that disproves your explanation and don’t spend time on already disproved ideas or arguments or those that can’t be disproved
      • Engage in self-criticism and question your assumptions
      • Find your mistakes early and correct them quickly before they cause harm
      • The mental habit of thinking backward forces objectivity – because one way  to think a thing through backward is by taking your initial assumption and say, “let’s try and disprove it.” That is not what most people do with their initial assumption. They try and confirm it.
    10. Backward thinking
      • Avoid what causes the opposite of what you want to achieve and thinking backwards can help determine what these actions are
        • Should also make explicitly clear what we want to achieve
      • “Wise men profit more from fools than fools from wise men; for the wise men shun the mistakes of the fools, but fools do not imitate the successes of the wise.” – Cato
    11. Risk
      • Reflect on what can go wrong and ask what may cause this to turn into a catastrophe?
      • Being wrong causes both an actual loss and an opportunity cost
      • To protect us from all unknowns that lie ahead we can either avoid certain situations, make decisions that work for a wide range of outcomes, have backups or a huge margin of safety
    12. Attitudes
      • “Life is long if we know how to use it.” – Seneca
      • Know what you want and don’t want
      • Determine your abilities and limitations. Need to know what we don’t know or are not capable of knowing and avoid those areas
      • Ask – what is my nature? what motivates me? what is my tolerance for pain and risk? what has given me happiness in the past? what are my talents and skills? what are my limitations?
      • Be honest – act with integrity and individuality
      • Trusting people is efficient
      • Act as an exemplar
      • Treat people fairly – must be lovable
      • Don’t take life too seriously – have perspective, a positive attitude, enthusiasm and do what you enjoy
      • Have reasonable expectations – expect adversity
      • Live in the present – don’t emphasize the destination so much that you miss the journey. Stay in the present and enjoy life today
      • Be curious and open minded and always ask “why?”
Appendix
 
Munger Harvard School Commencement Speech 1986
  • Avoid drugs, envy, resentment, being unreliable, not learning from other’s mistakes, not standing on shoulders of giants, giving up, not looking at problems from different POVs, only reading/paying attention to information that confirms your own beliefs
  • Be objective
  • “Disraeli…learned to give up vengeance as a motivation for action, but he did retain some outlet for resentment by putting the names of people who wronged him on a piece of paper in a drawer. Then, from time to time, he reviewed these names and took pleasure in nothing the way the world had taken his enemies down without his assistance.”
Wisdom from Charles Munger and Warren Buffett
  • Appeal to other people’s interests over your own
  • Institutional imperative – tendency to resist change, make less than optimal capital deployment decisions, support foolish initiatives and imitate the actions of peer companies
  • Board of directors have few incentives (unless large owners) to replace CEO
  • Type of people to work with – need intellectual honesty and business owners must care who they sell to
  • Need role models early on
  • Emulate what you admire in others but also be aware of what you don’t like
  • Know your circle of competence
  • Use all available mental models, not just what you’re comfortable with
  • Scale extremely important – efficiencies, information (recognition), psychology (fit in), and in some industries leads to monopolies and specialization
    • Disadvantages of scale – specialization often leads to bureaucracy
  • On what something really means – ask “and then what?” to truly get at somethings core
  • There is a certain natural tendency to overlook anything that is simple and important
  • Avoid commodity businesses
  • Deal only with great people and you will avoid 99% of life’s headaches

Buffett and Munger: A Study in Simplicity and Uncommon, Common Sense by Peter Bevelin

Summary
  1. A very interesting dialogue between Warren Buffett, Charlie Munger, the “librarian” and the “seeker” of knowledge. The dialogue discusses how to live a successful, happy and fulfilling life, what to avoid in life and in business and how to improve mental biases and heuristics in order to make better decisions
Key Takeaways
  1. On fatal mistakes, prevention and simplicity
    1. Mistakes are a fact of life
    2. Don’t bother about mistakes that don’t actually matter
    3. Avoiding problems is better than being forced to solve them
    4. If we understand what works and not, we know what to do
    5. It is better to try to be consistently not stupid than to be very intelligent
    6. Thinking backwards is a great tool for solving problems
    7. Keep it simple and make it easy for yourself
    8. The secret is ignorance removal
  2. On what doesn’t work and what does
    1. Find and marry a lousy person
    2. Turn our body and mind into a wreck
    3. Only learn from your own terrible experiences
    4. Use a hammer as your only tool and approach every complex problem as if it was a nail
    5. Go through life with unreasonable expectations
    6. Only take care of your own interest
    7. Blindly trust and follow the recommendations of advisors and salesmen
    8. Mindlessly imitate the latest fads and fashions
    9. Overly care what other people think about you
    10. Let other people set your agenda in life
    11. Live above your means
    12. Go heavily into debt
    13. Go down and stay down when bad things happen
    14. When in trouble, feel sorry for yourself
    15. Be envious
    16. Be unreliable and unethical
    17. Be a jerk and treat people really badly
    18. Have a job that makes you feel miserable
    19. Work with something that goes against your nature and talent
    20. Believe you know everything about everything
    21. Associate with assholes
    22. Distort your problems so they fit your wishes
    23. Stick to, justify and rationalize your actions no matter how dumb they are
    24. Be an extreme ideologue
    25. Make it easy for people to cheat, steal and behave badly
    26. Risk what you have and need, to get what you don’t need
    27. Only look at the sunny upside (over stress the downside)
  3. On what else doesn’t work and what does in business and investing
    1. Invest your money in overpriced assets – preferably businesses without any competitive advantages or future and with lousy and crooked management
    2. If you are a businessman think like an investor and if you’re an investor, think like a businessman
    3. Investing is about where to allocate your capital
    4. Buy “wrongly” cheap productive assets you understand
    5. Things are often cheapest when people are fearful and pessimistic
    6. Be opportunistic and adapt and change when the facts and circumstances change
    7. Stick to businesses where you can assess that their economics is good and getting better
    8. Buy assets protected with a durable competitive advantage run by able and honest people
    9. Understand why it has a moat – the key factors and their permanence
    10. One test of the strength of a moat is essentiality and pricing power
    11. Go in a field, in which you have no interest, not any competence or talent for, no edge in and where the competition is huge
    12. Think about where the business is going to be in the future – not the macro factors
    13. Common sense is better than advanced math and computer models
  4. On filters and rules
    1. The right filters conserve thought and simplify life
    2. Never lose sight of what you’re trying to achieve or avoid
    3. The tune out “folly” filter
    4. The important and knowable filter
    5. The circle of competence filter
    6. The too tough filter
    7. The opportunity cost filter
    8. The “and then what?” filter
    9. The “compared to what?” filter
    10. Checklists help – assuming of we are competent enough to pick the key factors and evaluate them
    11. Have some avoid-rules
    12. Learning never stops
What I got out of it
  1. An incredible book on heuristics, mental biases, how to live, how to not live, what to avoid, the importance of thinking backwards. Highly recommend and will re-read many times moving forward
  • Buffett and Munger have an amazing ability to eliminate folly, simplify things and boil down issues to their essence and get right to the point and focus on simple and timeless truths. Succeed because rational and very seldom let extraneous factors interfere with their thoughts
  • Making better decisions helps avoid a lot of misery
  • Start out with failure and then engineer out its removal
  • Einstein’s razor – things should be made as simple as possible, but no simpler
  • The more basic knowledge you have, the less new knowledge you have to get
  • Seeking Synthesis – always putting things in context and having a latticework mindset, linking the largest areas and using/always adding to your toolbox
  • The very successful say no to almost everything – you must keep control of your time
  • Consistently rub your nose in your own mistakes
  • Best way to avoid envy is to plainly deserve the success you get
  • Set up a system and environment which plays to strengths and minimizes weaknesses
  • Ignorance more often begets confidence than does knowledge
  • There is enormous efficiency in good character. If crooks knew how profitable being honest is, they would be
  • Knowing what you ultimately want to accomplish makes it easier for you to decide what is and is not important
  • Good question for field you know little about – “can you give me a very simple example and explanation for what you’re talking about?”
  • To speak/write clearly is to think clearly – orangutan test
  • Iron rule of nature is you get what you reward for
  • No need for extra analysis – just know what you need to know
  • Attractive opportunities come from capitalizing on human behavior (fear, pessimism, greed)
  • Understanding a business should always be filter #1
  • Best way to understand moats and their key factors and permanence is to study companies who have achieved them
  • Almost always easier to figure out who loses (short horses rather than long autos)
  • Franchise – another word for moats, a product or service that: is needed or desired; is thought by its customers to have no close substitute and; is not subject to price regulation. These three allow a company to regularly price its product or service to earn high ROC. The test of a franchise is what a smart guy with a lot of money could do it if he tried. The real test of a business is how much damage a competitor can do, even if he is stupid about returns
  • Share of mind matters more than share of market
  • Best business by far has high ROC with little need of incremental capital to grow at high rates
  • If you had $1b, could you compete? – silver bullet question (ask CEOs if they could kill one competitor, who would it be and why?)
    • When speaking with management ask “If roles reversed, what would you ask if I were running your business?
  • Northern Pike Model – if you introduce a dominant species, they will soon take over (as WalMart did early on)
  • You don’t have to make money back the same way you lost it
  • It’s simple, to be a winner, work with winners – get great management and let them do their thing
  • if you can detach yourself temperamentally from the crowd, you’ll end up being very successful
  • What is important and knowable? Ignore the rest
  • Wall of Shame for things / investments that have been mistakes (don’t forget to include omissions!)
  • Always consider higher order effects and the implications 

Men and Rubber: The Story of Business by Harvey S. Firestone, Samuel Crowther

One of my all-time favorite books, business or otherwise.  As always, I have attempted to put together something which is (hopefully) a manageable, actionable, and digestible introduction to Firestone’s thinking and business philosophy.

Plain Talk: Lessons From a Business Maverick by Ken Iverson

Summary
  1. Ken Iverson took over Nucor when he was 39 and compounded the business  at incredible rates for decades. On top of it, he did it in the steel industry which is not known for its attractive returns. Iverson lays out his management principles which center around employee trust and loyalty, decentralization, honesty, limited hierarchy and bureaucracy and aligning the employees and manager’s interest through partnership.
Key Takeaways
  1. “We have little tolerance for politics, the pettiness, the fixation on rank and status, or the insensitivity to employees’ needs that people in most big companies endure as a matter of course.”
  2. “Today’s leader must maintain sensitivity to the views of everyone who has a stake in the company and realize that each one can make a special contribution to meeting the company’s goals.”
  3. “Good leaders must be good followers. Leaders and followers share certain characteristics such as listening, collaborating and working out competitive issues with peers.”
  4. “Specialized management is an enemy of hope and good management. I think what we need, if anything, is deep generalists.”
  5. “What we did was push aside the notion that managers and employees have inherently separate interests. We’ve joined with our employees to pursue a goal we can all believe in: long-term survival”
  6. “Equality, freedom and mutual respect promote motivation, initiative and continuous improvement.”
  7. “Every manager should be something of a psychologist…I’ve found that, as employees, many people want first and foremost to be appreciated for who they are. They want to be acknowledge as unique individuals – each with immense and unrealized potential. All too often, though, their managers cast them as drones.”
  8. “Don’t fall into the trap of ruling out failure. Risk, by definition, carries the possibility of failure. See that possibility. Study it, but never, ever hide from it.”
  9. “You have to realize that your fears and ambitions are the lenses through which you view and assess risks, and that the image those lenses convey may not always be true.”
  10. Central tenets
    1. Choosing the right people and earning their loyalty and trust
    2. Reallocating manager’s time
    3. Letting employees guide their own development (cross-trained to do multiple jobs)
    4. Providing information to employees (share everything)
    5. Letting employees invest in technology
    6. Active listening
    7. As little hierarchy/bureaucracy as possible
    8. Weighing mergers and acquisitions from employees’ perspective
    9. Shaping the work environment is the manager’s primary job
  11. Iverson took over Nucor at age 39 as he was the only one who ran a profitable segment
  12. Whole company shared in the pain during tough times with senior executives taking an even bigger pay cut than the employees
  13. Run company for investors, not speculators
  14. Every single decision made with long-term view – simple but not easy
  15. Never laid anyone off – employee loyalty is of utmost importance (pair with The Loyalty Effect)
    1. “When is laying people off the practical and sensible thing to do? Can we expect employees to be loyal and motivated if we lay them off at every dip of the economy, while we go on padding our own pockets?”
  16. No job descriptions at Nucor – employees can define their jobs in their own way in order to be the most productive possible
  17. Each division is run as its own enterprise – trust your instincts, decentralized, responsibility and accountability for everyone
  18. Try to keep business small (less than 400-500( as management loses touch with employees as it gets larger
    1. Iverson talked to every manager every day
    2. Fan of formal surveys – anonymous and forces manager to think how the current situation truly is
    3. Policy for managers to meet with every employee at least once through the year
  19. Delegation without information is suicide
    1. Delegating gets people to buy in and most likely to a much better job than if the manager was hovering over their shoulder
    2. Streamline information – too much is as bad as too little
    3. Find early warning signals
    4. Differentiate between objective and subjective info – cause and effect
  20. Centralized and decentralized operations are better in certain situations. Uniformity and consistency leads to centralized; innovative and flexible needs more of a decentralized approach. Either way be decisive
  21. Healthy tension in sr. executive meetings is usually a good things – shows people care, have thought about issues, brings up issues early before they have a chance to bubble over
    1. Know that their motives are healthy, objective and coming from a good place
  22. Great management is situational. Hard to take a great manager in a certain business/industry and expect that same result in a completely different situation
  23. Corporate culture sets the tone for interactions between all stakeholders
    1. Nucor removed hierarchy and was very egalitarian. Sustained employee motivation
    2. Eliminates noise to focus on essential – senior management not worried about perks, corner offices and other distractions
    3. Only 4 layers of management at Nucor lead to short lines of communication
  24. People often don’t need answers, simply to be heard
  25. Share all information with employees
  26. Show how much they truly cared and valued their employees by hand delivering birthday cards and had all employees names in the annual report
  27. Pure equality brings out pure effort
  28. People jump on the chance to shape own lives and take responsibility
  29. Nucor’s biggest competitive advantage is its culture and it always will be (has to be consistent)
  30. The work place shapes people’s state of mind – both physical and cultural
  31. Give employees the freedom to innovate – they are the engine of progress
  32. Compensation incentives are vital. Give employees a stake in the company! Partnership aligns values and brings out everyone’s best effort and productivity
    1. Try to make profit sharing timely and immediate
  33. Helping employee’s families is a huge win-win (college bills, medical bills, etc.)
  34. Small is beautiful – can operate on the fringe, innovate and slowly take market share from bigger players
    1. Are able to learn all aspects of the business when small
  35. It’s not easy to change people
  36. No shortcut from big and bureaucratic to small and nimble
  37. Be careful not to criticize failure as this stifles good risks and innovation
  38. Experimenting and failure is necessary before success
  39. Be conscious that senior management tends to be more risk averse, comfortable and complacent
  40. Ethics – look for options that are equitable, right and practical
  41. Peter Principle – people will rise to the level of their incompetence
  42. Simplicity is integral to Nucor’s success
    1. Honesty leads to stability and credibility
    2. No hierarchy or bureaucracy
  43. MBAs tend to lack communication skills, how to relate to and lead people
What I got out of it
  1. Awesome principles and amazing read. Iverson has put The Loyalty Effect into action at Nucor

The Autobiography of Andrew Carnegie by Andrew Carnegie

So much to be gotten out of Carnegie’s autobiography that I made it a bit more of a formal write-up

The Autobiography of Andrew Carnegie

It’s Your Ship by Captain D. Michael Abrashoff

Summary

  1. Captain Abrashoff recounts his story and the leadership principles he used to turn around the USS Benfold, one of the worst performing ships in the navy. Believes these leadership principles to be universal and in today’s age, getting the most out of your people and helping them grow is more important than ever
Key Takeaways
  1. Preaches the leveraging of human capital
  2. Three variables to get most out of people – leader’s needs, organization’s atmosphere and crew’s potential competence
  3. Leadership is earned, not given
  4. Must know and understand yourself before can lead others. Must try to avoid making decisions based on fear, ego, etc. and doing this will be recognized in others and will garner further respect and trust
  5. Helping people attain full potential will allow you to reach higher peaks than if you simply commanded them
  6. Leadership principles – lead by example, listen aggressively, communicate purpose and meaning, create a climate of trust, look for results and not “salutes,” take calculated risks, go beyond standard procedure, build up people’s confidence, generate unity and improve people’s quality of life as much as possible
  7. “It’s your ship” was the motto he used on his ship in order to convey the responsibility everybody on the ship had with their decisions and conduct 
  8. Must ask self, “what does the boss want from me?” And do whatever it takes to make that happen. Might not be “by the book” but it will satisfy the boss. Must also act in the least threatening manner to show boss you’re just trying to do the best job possible and not taking unnecessary risk
  9. Must avoid appropriate risk takers for this is how innovation and growth happens
  10. Often, great new ideas and risks don’t have metrics and this is how innovative ideas die in corporations
  11. Must trust your gut – can never go wrong if you feel you’re doing the right thing 
  12. As a leader you must do your best to see things out of your employee’s eyes. Only then can you make the best decision and foster their potential
  13. There is always a better way to do things. Must question everything and get people’s input as it encourages buy in and makes carrying out the order, projects, etc. fun
  14. Given the right culture and environment, there are few limits to people’s potential
  15. Considers Secretary of Defense William Perry the finest leader he has ever served. Was essentially his business manager and became an incredible leader by learning from him and how he viewed the world and made decisions. Considered his job to take care of everything so Perry could take care of his job with full attention. If you do your job right, your bosses trust you and don’t worry about you and that gives you flexibility to lead and grow
  16. Being able to think like your boss turns you into a true leader instead of an individual contributor
  17. If can get past ego and look inwards, find that often problems arise because you weren’t clear enough or  didn’t provide enough time or training
  18. Leaders must be aware of how infectious their moods, both positive and negative, are to their teams
  19. Must show your team that nothing is more important to you than their well-being
  20. Be aware of how important it is that your motives are pure and that you express them that way. Self-promotion will only get you so far
  21. Cover ups always fail
  22. Newspaper test – if what you do on the front page of the newspaper, would you do it?
  23. Fine to disagree and discuss but once you have lost the argument, important to back the new plan completely
  24. Aim to treat every encounter as the most important thing at that moment. Establish a personal connection with every team member – “become every person’s biggest cheerleader!”
  25. Aim to match team members personal goals and talents with tasks
  26. Practice what you preach! Words and confidence are infectious and tend to be a self fulfilling prophecy
  27. Clear communication is crucial for high performance
  28. Talent knows no rank
  29. After creating a great brand, defend it
  30. With good leadership and culture, freedom creates discipline.
  31. The “after action review” concept from the army is extremely powerful. Looking at the results of your decisions and actions after the fact helps clarify whether it was accidental or not and is a great way to learn and improve
  32. Give people all the responsibility and then stand back. This type of trust and freedom is an boost to maturity, learning and leadership
  33. Earn trust only by giving it
  34. Great leadership begets great leadership. You mentor and teach those below you who go on to teach others. Flywheel effect
  35. Welcome the bad news messenger or else you won’t hear about issues until it’s too late 
  36. By not bringing up small problems you can solve, urgent matters will receive great attention. Do your homework and know exactly what the problem is and have some suggested solutions ready
  37. Dealing effectively with difficult bosses is an invaluable skill
  38. In times of peril, people always look to the top for guidance and motivation
  39. Trust makes money
  40. Rigidity gets in the way of creativity
  41. Let your crew feel free to speak up. “Yes” people are a cancer to any organization
  42. Nurture the freedom to fail. Empowerment is vital as it leads to autonomous innovation
  43. Strive to offer high quality at low cost so customers are fighting for your skills
  44. Challenge your crew beyond its reach
  45. There’s an art to handling your boss and it involves knowing what their trigger points are (saving money, time, etc.)
  46. Take calculated risks which are worth taking
  47. Bet on people who believe in themselves
  48. If a rule does make sense, break them subtly
  49. Sometimes solutions are so simple we ignore them. Don’t
  50. Build your people up. Praise is infinitely more productive than punishment
  51. Make people look and feel so good that they can’t imagine working without you
  52. Positive, personal praise is the essence of real leadership
  53. Trust people. You’ll find they’ll often prove you right and step up to the challenge
  54. You cannot order excellence. You have to nurture it and create an environment which encourages it
  55. Make cross training your people a priority
  56. Continuously and honestly provide feedback
  57. How you achieve your goal just as important as achieving it
  58. Must take people’s background and circumstances in consideration before judging them
  59. A leader’s final evaluation should not be made until 6 months to a year after they leave. Setting up a successful succession plan crucial
  60. The greatest satisfaction transcends personal achievement, it lies in helping others
What I got out of it
  1. One of the best leadership books I’ve ever read. Excellent real life examples of how to implement simple yet hard leadership principles. Highly recommend reading